But Mr Ai, who was released in June after being detained for more than 80 days by Chinese authorities, told the BBC he does “not feel powerful at all”.
The magazine said he was chosen by the panel because of his political activism, as much as his artwork.
China criticised the selection saying it was based on “political bias”.
In a statement, ArtReview magazine said: “[His] activities have allowed artists to move away from the idea that they work within a privileged zone limited by the walls of a gallery or museum.”
“It’s expanding the possibilities of what you can do with art, and as an artist how you can use your voice,” it added.
Chinese Foreign Ministry spokesman Liu Weimin said: “China has many artists who have sufficient ability. We feel that a selection that is based purely on a political bias and perspective has violated the objectives of the magazine.”
The artist’s arrest in April, as he boarded a flight in Beijing bound for Hong Kong, prompted a global campaign for his release.
Chinese authorities said Mr Ai was detained on charges of tax fraud, but his family have always insisted it was for his political activities.
Under the conditions of his release, he is not allowed to be interviewed by journalists or use the internet.
In an interview with the BBC, the artist said he was being “strongly restricted”.
He added: “Like this kind of conversation today I am doing is a violation. I think it may bring me very big trouble.”
“I don’t have this concept to separate my art from my daily life. I think they are one thing to me. They are always one.
“How do you find a way to express yourself and how to communicate with others? Art is how we put our lives to deal with our living conditions.”
Mr Ai, one of China’s best-known artists, rose to international prominence as co-designer of Beijing’s “Bird’s Nest” Olympic Stadium.
In 2010, he created a carpet of 100 million porcelain sunflower seeds for Tate Modern’s Turbine Hall in London.
Damien Hirst, famous for his pickled sharks, is the only other artist to have previously topped the list, in 2005 and 2008.
This year second place went to the directors of London’s Serpentine Gallery, Hans Ulrich Obrist and Julia Peyton-Jones.
New York’s Museum of Modern Art director Glenn D Lowry was in third place, followed by US gallery owner Larry Gagosian, who topped last year’s poll.